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John D. Thomason's  Instablog

John D. Thomason
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I am a retired (as of September 2001) IT manager. While I have always followed the markets, during my IT career my market research time was limited. Upon retiring, I have focused full-time on the markets and my own market education and growth. I have evolved my investment/trading strategy over... More
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  • Molson Coors - A Great Covered Call Candidate

    The following is from my Daily Blog posting for Wednesday, 12/12/2012, available at my website,

    With the market again being up for an extended period, climbing the proverbial "wall of worry", I start looking at my holdings for sell candidates, or covered call write candidates. I settled on Molson Coors (NYSE:TAP) yesterday (12/11/2012), selling a July 2013 call, strike price $45, for $2.25, with TAP trading in the $43.50 range. For most stocks, a strike more than $1.00 above the current trade level will seldom pay as much as $1.00, even going out several months. For some reason, TAP offers more than double the usual return. Don't ask me why, I guess the options market makers either drink a lot of Molson or Coors beer, or they figure the rest of the country will do so. I had previously sold a January 2013 $45 strike call on 9/5/2012, also for $2.25, and then bought it back on 11/9/2012, for $0.35, for a gross profit of $190.00, achieved in only two months. TAP was trading at $44.70 when the earlier call was sold, and at $41.33 when it was covered. TAP pays a decent, but not great, dividend of $0.32/share quarterly, yielding slightly under 3% at today's trading level. While the stock makes the cut, barely, as a dividend payer, it really is only worth owning for the covered call income, at least as far as I'm concerned. Of course, this phenomenon likely is not permanent. If TAP drops again like it did last fall, the relatively generous call prices may not be forthcoming the next time around. On the other hand, it might go up over $50, in which case the options market would be proven smarter than I thought, and obviously, smarter than me. If that happens, while I undoubtedly will regret the forgone capital gain on the shares, I won't cry too much over selling a dividend payer that is only yielding 2.6%, which would be the case at a share price of $50. Stay tuned, I will post to my blog how this second TAP covered call trade works out, when I close the option position.

    Disclosure: I am long TAP.

    Additional disclosure: I also sell covered calls against my long stock position in TAP.

    Tags: TAP
    Dec 12 9:24 AM | Link | Comment!
  • Hewlett Packard - What I Am Thankful For

    A Thanksgiving Day message regarding recent developments at Hewlett Packard (NYSE:HPQ), as I am thankful that I did not express the innermost thoughts on HPQ that I was secretly thinking at the time I discussed the stock in my recent article, Cisco, Intel, Microsoft, Hewlett-Packard: Value Stocks, Seriously. Let me explain further:

    Hewlett Packard (HPQ) has been in the news again recently, as the company reported earnings yesterday (Tuesday, 11/20/2012). Results were not too bad, actually, except for one thing - a huge multi-billion dollar write down being taken on the firm's 2011 acquisition of Autonomy, an English software firm. In addition to the purchase being a mistake from all perspectives, the pain is even worse than just a poor business decision, as charges of misrepresentation and fraud are now being leveled at the target firm regarding the financials that were the basis for the acquisition price. HPQ dropped to barely double digits yesterday, closing at $11.71. In my recent article referenced above, I surmised that HPQ was at best a speculation stock, with the decline likely continuing unless something changed for the better. Frankly, at the time, I was thinking the $14 range would probably mark a bottom, with a slow, creeping recovery possible over the next couple of years. But I didn't say that, for which, in the spirit of the upcoming holiday, as noted above, I'm thankful. So where does HPQ go from here? All I can say is a purchase now would fare better than any buys made in the last several years, but would the speculator see a profit? I won't say it is not possible, but I will say it is not a sure thing.

    Disclosure: I am long HPQ.

    Additional disclosure: This falls under the heading of "do as I say, not as I do". Live & learn, when you think it cannot get any worse, you are probably wrong!

    Tags: HPQ
    Nov 21 9:46 AM | Link | Comment!
  • Hard Times For Exelon And NuStar

    Two of my stocks have fallen on hard times lately, Exelon (NYSE:EXC) and NuStar Energy (NYSE:NS). EXC posted decent earnings, all things considered, but comments from the CEO about a possible dividend cut being required to maintain the firm's investment grade rating have tanked the stock recently. With the shares now yielding over 6%, and an ex-dividend date coming up (11/13/2012), I added shares at just over $32 Monday (11/5/2012). I believe the shares are a buy here for long-term investors, and even if the dividend is reduced, it won't be cut too drastically, I'm betting. A utility has to pay a decent dividend; otherwise, why would anyone ever buy a utility stock?

    NuStar's recent earnings were a disappointment, no doubt, but I still believe in the firm's eventual recovery from the disastrous foray into asphalt. Significant purchases of NS units in September by William Greehey, chairman of NuStar's parent company - NuStar GP Holdings (NYSE:NSH) -- at the depressed prices seen recently tells me that management believes in the recovery scenario. Still, with the distribution coverage coming in at only .68x based on Distributable Cash Flow for the recent quarter, I have not added more shares yet on the most recent swoon. I added at $48.65 when the shares swooned earlier a few weeks ago, and I was congratulating myself briefly as they quickly rose back above $50. This time, with the shares barely above $46 and today (11/6/2012) being the last day before the next ex-dividend date, I may add more -- certainly if I can buy under $46. If the stock pops back up over $47 or close to it, I probably will pass. If I buy more, it won't be a lot more - I'm close to being maxed out NS. Certainly at some point the distribution has to be covered if it is to be sustained, and until that happens, the income is not safe.

    Life as a value investor is tough. Value is usually not found in the absence of concerns. Yet, I believe it is the only way to invest. If you buy Colgate Palmolive (NYSE:CL) at $110 or 3M (NYSE:MMM) at $95, to name two exemplary firms and their recent price highs, with yields well under 3%, you are aiming for mediocrity at best. Your chances of making money in a two to three year time frame are much better with EXC at $32 and NS at $45 than with CL at $110 and MMM at $95, both of the latter firms being priced for perfection at those highs. Of course, any stock can blow up, so no matter how much of a bargain a troubled stock seems to present, an investor has to limit the position size to avoid a portfolio disaster if the unthinkable happens. You can take a portfolio hit on 2% to 3% of a portfolio without too much grief, but not on 20% to 30% of a portfolio.

    Just remember, one cannot claim to be a true value investor unless he/she is somewhat uncomfortable after making a purchase.

    Disclosure: I am long EXC, NS.

    Tags: EXC, NS
    Nov 06 1:50 PM | Link | Comment!
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    Nov 13, 2013
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    Oct 30, 2013
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